COVID-19 to hit Asian industries harder than 2003’s SARS — Capital Economics
Czeriza Valencia (The Philippine Star) - February 15, 2020 - 12:00am

MANILA, Philippines —The spread of the coronavirus disease 2019 (COVID-19) will hit Asian industries harder than the 2003 onslaught of the severe acute respiratory syndrome (SARS) as the extent of factory closures in China stand to disrupt supply chains in the region, said London-based think tank Capital Economics.

In a new research brief, the firm said the garment and electronics sectors are likely to experience the worst of the disruption.

“Factory shutdowns in China are starting to have significant knock-on effects on the region as companies struggle to source intermediate goods. The garment and electronics sectors are likely to experience the worst of the disruption,” said Capital Economics.

A large portion of what Asian countries export to China are inputs which are then assembled before either being consumed in China or shipped off to the rest of the world. With factories  extending closure, Chinese demand for intermediates has dropped off sharply.

“The worsening prospects for Asian industry is one of the reasons we think the economic impact from the spread of the coronavirus will exceed that from SARS in 2003. During SARS, most factories and offices in China and the rest of the region remained open, and the impact on industrial production and exports was relatively small,” Capital Economics said.

The Philippine government sees the travel and tourism industry bearing the brunt of the contagion, with air travel and primary tourism activities suffering the most as foreign arrivals dwindle significantly.

The first to be hit are airlines, hotels and restaurants because the combined effects of travel restrictions and fear of contamination curtail travel and consumption.

If the spread of the new coronavirus persists for around six months, allied industries should brace for impact, government officials have said.

Impact on trade, meanwhile, remains minimal as COVID-19 origin Wuhan, the capital of Hubei province, only comprises 0.9 percent of the Philippines’ total trade with China.

Capital Economics said the level of distruption would depend on how much inventory  companies have in stock.

“Given the prevalence of just-in-time delivery of goods across the region, other companies are unlikely to have much spare stock in storage,” the firm said.

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